Planning to buy a car? Six handy tips to get an awesome deal from the lender and the dealer
Remember, loan agents and car dealers have high targets to meet during festival seasons. This means, negotiation hard and you will land a better deal
Data from the Society of Indian Automobile Manufacturers (SIAM) show that festival season may be driving the car sales. As per the data, the sales in September were up 6.86 percent on year at 2,08,656 units. As the festival fever spreads, there are expectations that the sales are also likely to go up.
So are you going to buy one? If yes, here are a few unwritten rules you should keep in mind to get best car deal:
1) Not less than 20 percent as down-payment: As much as 20 percent of the cost of the car needs to made as down-payment. This figure makes sure that you pay a good enough amount initially so that you don't take a large amount as a loan. This is not so large an amount that you probably cannot set aside. Also, this ensures that you borrow a smaller amount from the bank and hence the total cost of your car remain under control.
2) Not more than 4 years: This is the number of years you need to take the car loan for. Of course, there are lenders like State Bank of India which allow you to borrow for 7 years. But that works more in the lender's favour than your's. Why? The reason is simple. The longer the loan tenor, the more you pay towards interest. Your total cost of loan increases with tenure.
3) For cheaper rates: Usually the dealer would offer you a loan through a pre-existing tie-up with a financier. But, dealers usually get 1-2 percent commission on your loan. So you might as well approach your bank or check deals at a loan portal. Of course, that requires some effort on your side. If you prefer taking the dealer’s loans, you can ask for discounts or free accessories such as a car stereo. With your own bank, you might get a good deal as you have an already established comfort level. This also makes loan processing easier and quicker. It’s always better to go for the fixed rate option. Consider floating rates only if the gap is of 200-300 basis points. Remember, many lenders charge you for prepayment of car loans and can be as high as 4 percent. So the chances of you actually benefiting from any general decrease in rates is not high. In fact, there is a risk that you may end up paying more if the interest rates increase. In fact, go for such lenders which do not charge a prepayment penalty.
4) Use pressure: Festival seasons may be raining discounts for you, but loan agents and dealers have huge targets to meet. What this also means is that you can negotiate hard for better deals. You can ask for a processing fee loan waiver from the lender and freebies from dealers.
5) Don’t go over board: Keep in mind that the EMI for the car loan should not be more than 10 percent of your monthly salary. The lower the better. Anything over 10 percent could easily put you into a debt trap eventually. In fact, ideally not more than 30-35 percent of your monthly income should go towards servicing all your debts, like home loan instalments, car loan instalments, credit cards dues and the like.
6) Other tips: Apart from these, there are a few other tips. If you aren’t very particular about a certain colour, ask for the not-so-popular colours and ask for a discount. Metallic colours are more expensive than non-metallic ones. One way to reduce cost is to choose non-metallic colours. In fact, non-metallic colours can be Rs 8,000-10,000 cheaper.
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